Budget leaders: Don’t look for costly changes to state business tax

October 30, 2008

AUSTIN – Small businesses are unrelenting in pushing for changes to a new state tax that many say has left them gasping, but budget leaders today suggested any revamp can’t cost the state tax money — at least, it can’t cost much.

“We’re still a billion sort of what we want to raise (from the business tax). We don’t want to add to that misery,” said House Appropriations Committee Chairman Warren Chisum, R-Pampa, although he added, “We still don’t want to do anything that would cause people to have to go out of business.

Changes that don’t have a big fiscal note could be accomplished, but not costly ones like a proposal by the National Federation of Independent Business-Texas to raise the small-business exemption from $300,000 to at least $1 million, he said.

After a meeting today of the Business Tax Advisory Committee that was dominated by concerns about rising taxes from small businesses, Senate Finance Committee Chairman Steve Ogden said changes are needed “but I don’t know what those changes are” and he doesn’t know whether small businesses will see relief.

“What I expect to happen, because it happened in the last session, is that the bill is going to have to be revenue neutral,” said Ogden, R-Bryan, so any reduction in one area will need to be made up somewhere else.

The new business tax was pushed by Gov. Rick Perry and approved by lawmakers in 2006 as part of a package that also lowered local school property tax rates when the state faced a court order to change the public education tax system.

The expanded business tax was meant to close loopholes that allowed a number of companies to avoid paying levies and to subsidize the cost of lower school property tax rates. Many, however, note that the reduction in rates has been hidden because higher appraisals meant they still had to pay higher property tax bills.

It had been projected to yield $5.9 billion the 2008 fiscal year, which ended Aug. 31, but has brought in about $1.4 billion les. Figures won’t be final until November because of businesses that filed for extensions.

Sen. Kirk Watson, D-Austin, a member of the advisory committee, noted that the lack of final numbers has prevented the state comptroller from developing figures on what size of businesses are bearing the biggest burden under the new tax.

“I remain frustrated that we are basically two months away from a legislative session, and we really don’t know answers to some pretty significant questions. That’s not a criticism of anybody, since that’s the way the tax was set up to be collected. There are delays. It is a new tax,” Watson said. “What it means is to some degree, we’re going to go into the session being asked to make decisions regarding this tax somewhat blinded.”